ECON: MACRO4 (with CourseMate, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423623
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 15, Problem 4.11PA
To determine
− The impact of quantitative easing on Fed’s
Concept Introduction
Quantitative Easing − It is the
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26. IMPACT OF DEVALUATION The inflation rate in Yinland was 14
percent last year. The government of Yinland just devalued its
currency (the yin) by 40 percent against the dollar. Even though it
produces products similar to those of the United States, Yinland has
much trade with the United States and very little trade with other
countries. It presently has trade restrictions imposed on all non-U.S.
countries. Will the devaluation of the yin increase or reduce inflation
in Yinland? Briefly explain.
4. Inflation and interest rates
The following table shows the average nominal interest rates on six-month Treasury bills between 1971 and 1975, which determined the nominal
interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1971 to 1975. (All
rates are rounded to the nearest tenth of a percent.)
Nominal Interest Rate
Inflation Rate
Year
(Percent)
(Percent)
1971
4.5
4.2
1972
4.5
3.3
1973
7.2
6.3
1974
8.0
11.0
1975
6.1
9.1
On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1971 to 1975. Next, use the green
points (triangle symbol) to plot the real interest rates for those years.
(?)
8.0
7.0
6.0
Nominal Interest Rate
5.0
4.0
Real Interest Rate
3.0
2.0
1.0
-1.0
-2.0
-3.0
1970
1971
1972
1973
1974
1975
1976
YEAR
According to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment?
O 1971
O…
Question: The electricity prices and the natural gas prices have increased drastically, 15 percent and 12 percent respectively. The direct effect of these increases on the inflation rate is 0.6 percent, and the indirect effect is more than 1 percent. Taking into consideration that the producer price index is over 38 percent.
What are the policies that should be implemented to counterbalance the effects of these price increases on the economy?
Chapter 15 Solutions
ECON: MACRO4 (with CourseMate, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- Question 5 Inflation Suppose that inflation proceeds at a constant rate of 6% per year from mid-2015 through mid-2018. What will be the value of a dollar in mid-2018 in constant mid-2015 dollars? (round to 4 decimal places)arrow_forward5.From 2015-2019, the Austrian accommodation and food services industries have grown in real terms by 4.1 %, the Austrian economy as a whole has grown by 8.7 %. Which of the following statements is true? a) Total production of the accommodation and food services industries in 2019 was larger than in 2015. b) Total production of the accommodation and food services industries has grown faster than the rest of the economy. c) The question can’t be answered because inflation is not corrected for. d) From the given numbers it follows that the sum of tourism receipts has grown during the respective period. e) During that period the contribution of the accommodation and food services industries to the Austrian economy has relatively decreased.arrow_forward5. How might a rapid rise in inflation harm you? How might a rapid rise in inflation help you? In answering this question consider your role as both a consumer, worker, and borrower. Consider the likely effect on your real wages, and any interest you recelve as a saver. Would it be advantageous to borrow money if you expected inflation to rise? Would you want a fuxed rate loan or one with an adjustable interest rate?arrow_forward
- Question: The latest PPI (Producer Price Index) in the US was 9.6% for November. The CPI was 6.8% for November in the US. Suppose that inflation in the US continues to accelerate, and the US Federal Reserve aggressively tighten monetary policy by raising its policy rate. Describe what would happen to the 10-year bond yield, the stock index and the exchange rate in the Philippines?arrow_forward3) Suppose that on January 1, 2019 a bank lends $20,000 to a person. The bank and the individual both agree that the real interest rate charged on the loan should be 10% and the loan is going to be totally paid ($20,000 plus interest), in a one-time payment, on December 31, 2020. Suppose the two parties to this transaction can perfectly foresee what the inflation rate for this period is going to be. Given this information, what is the nominal rate the Bank has to charge on this loan? Assume that the CPI is computed at the beginning of each year.arrow_forward7. Federal Reserve chairman Jerome Powell has expressed that the U.S. Federal Reserve is conducting actively purchasing U.S. government securities out of a desire to INCREASE the U.S. inflation rate up to 2.0 percent per year. In the past, the Federal Reserve has expressed a fear of deflation, which some countries around the world (Japan, and some European nations) have experienced. Use either your statsbook or the internet to provide a description of how the inflation rate for the U.S. has changed over time. In doing so, identify what represents a HIGH inflation rate for the U.S. and what represents a LOW inflation rate.arrow_forward
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